Activist investor Land & Buildings Investment Management LLC called on mall real estate investment trust Taubman Centers Inc. to spin off assets and exit Asia to maximize shareholder value.
In a letter to Taubman shareholders, Land & Buildings' founder and chief investment officer Jonathan Litt said his time on Taubman's board showed him that "one independent shareholder voice in the boardroom was simply not enough to implement the changes necessary to drive shareholder value at Taubman." Noting that all of the company's directors will be up for election at the 2020 shareholder meeting, Litt said he will monitor Taubman over the coming year and "take action to hold this Board accountable at the 2020 Annual Meeting including by nominating directors."
Specifically, Litt said Taubman should spin off its 11 most productive U.S. assets, which he referred to as its "jewel box" properties. He said these assets are "likely worth double" Taubman's current share price based on property-by-property cap rates applied by a leading data firm. The remaining company, he said, would continue to have substantial cash flow and material asset value as a stand-alone company.
He also said the company should exit its Asia investments and that such a move could lead to nearly 10% accretion to annual earnings, reduce debt and remove future capital commitments related to development. "Indeed, the Asia fully loaded returns were not as solid as disclosed, and new projects in Asia will require more capital," Litt said.
Blackstone Group LP recently acquired a 50% stake in three Taubman proprieties in Asia, which Litt pointed to as a sign of investor interest in these assets. For the company's part, Taubman Chairman, President and CEO Bobby Taubman said on an earnings call in February that the deal "absolutely reconfirms our commitment to the Taubman Asia platform."
Taubman did not immediately respond to a request for comment.